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What Alberta Budget 2021 means for your small business

Last updated: Oct. 8, 2021 

Last week Alberta Finance Minister Travis Toews presented the province’s fiscal 2021-22 budget.

There are no big surprises in this budget. As expected, the government is increasing spending on health care. They’ve increased the health budget for 2021-22 to $23 billion, up $877 million from last year’s estimated total. Another $1.25 billion will go to COVID-19 spending.

The minister anticipates a deficit of $18.2 billion for 2021-22 on estimated revenues of $43.7 billion. Alberta’s debt will pass the $100 billion mark, with no plans to balance the books.

We’re happy to report there are no new taxes or tax increases in the budget. And no provincial sales tax has been announced… yet.

You’ll find a summary of the highlights relevant to your small business below.

New Alberta grant for small business

Alberta businesses hoping for more financial relief will have to wait until mid-April, when they’ll be able to apply to the new Enhanced COVID-19 Business Benefit program.

The government has earmarked $120 million in funding for this program.

What is the Enhanced COVID-19 Business Benefit?

The Enhanced COVID-19 Business Benefit will provide payments of up to $10,000 to eligible small-and-medium-sized businesses in Alberta hit hardest by the pandemic and public health restrictions.

To qualify, your business must have experienced a revenue reduction of at least 60%. Payments will be calculated based on 15% of your business’s monthly revenue, up to a maximum of $10,000.

Your business will be able to use the money to help offset the costs of re-opening, and implementing public health measures. This includes what you’ve spent on physical barriers, PPE and disinfecting supplies, along with paying rent and employee wages, replacing inventory and expanding online business or e-commerce opportunities.

More information on the program will be released closer to the launch date in April.

That program will replace the Small and Medium Enterprise Relaunch Grant, an Alberta grant for small business that offers up to $20,000 in funding to help offset a portion of your relaunch costs. Applications for the Small and Medium Enterprise Relaunch Grant close March 31, 2021.

Innovation Employment Grant

The province announced $166 million over three years is going to the new Innovation Employment Grant, which repays small businesses up to 20% of research and development costs (R&D).

If your corporation is eligible, you’ll be able to claim the grant in the form of a refundable tax credit when you file your annual corporate tax return.

The grant provides qualified corporations in Alberta with:

  • An 8% payment for eligible R&D spending carried out in Alberta, up to the corporation’s base level of spending
  • An enhanced 20% payment for eligible R&D spending that exceeds the corporation’s base spending level
  • A firm’s base level of spending is determined by calculating the corporation’s average qualifying R&D spending over the previous 2 years.

Eligible expenditures must have been incurred in Alberta after December 31, 2020 and match those that qualify for the federal Scientific Research and Experimental Development Tax Incentive Program.

The grant provides benefits on up to $4 million in annual R&D spending.

Education Property Tax

The government has frozen education property tax rates for a second year to lessen the burden on Albertans and businesses.

As mentioned above, there are no new taxes or tax increase. Below is a summary of personal and corporate tax measures in Alberta.

Personal tax measures

Personal income tax rates in Alberta

Alberta Tax Rates

2020 Taxable Income

2021

10.0% $0 to $131,220 $0 to $131,220
12.0% $131,220 to $157,464 $131,220 to $157,464
13.0% $157,464 to $209,952 $157,464 to $209,952
14.0% $209,952 to $314,928 $209,952 to $314,928
15.0% $314,928 and over $314,928 and over

 

Alberta’s combined federal and provincial top marginal rates for income, capital gains and eligible dividends:

Personal Combined Federal/Provincial Top Marginal Rates

2020 2021
Interest and regular income 48.0% 48.0%
Capital gains 24.0% 24.0%
Eligible dividends 31.7% 31.7%
Non-eligible dividends 42.3% 42.3%

 

Combined federal and Alberta Personal Tax Rates 2021

Bracket Ordinary Income* Eligible dividends ** Non-eligible dividends **
$209,952 to $216,511*** 43.32% 27.85% 36.93%
$216,511 to $314,928 47.00% 32.93% 41.16%
Above $314,928 48.00% 34.31% 42.31%

 * The rate on capital gains is ½ the ordinary income rate.

** The rates apply to the actual amount of the taxable dividends received from taxable Canadian corporations.

*** The federal basic personal amount comprises two elements: the base amount ($12,421 for 2021) and an additional amount ($1,387 for 2021). The additional amount is reduced for individuals with net income in excess of $151,978 and is fully eliminated for individuals with net income in excess of $216,511. Consequently, the additional amount is clawed back on net income in excess of $151,978 until the additional tax credit of $208 is eliminated; this results in additional federal income tax (e.g., 0.32% on ordinary income) on net income between $151,979 and $216,511.

Alberta Non-Refundable Tax Credits

Personal tax credits for 2021 will not be indexed. The maximum tax credits amounts and actual Alberta tax credits for 2020 and 2021 are set out below.

Alberta Non-Refundable Tax Credits

2020 2021
Maximum Amount Alberta Tax Credit Maximum Amount Alberta Tax Credit
Basic Personal Amount $19,369 1,937 $19,369 1,937
Spousal Amount 19,369 1,937 19,369 1,937
Eligible dependent amount 19,369 1,937 19,369 1,937
Age amount 5,397 540 5,397 540
Infirm dependent amount 11,212 1,121 11,212 1,121
CPP Contributions 2,898 290 3,166 317
EI Contributions 856 86 890 89
Pension income amount 1,491 149 1,491 149
Disability amount 14,940 1,494 14,940 1,494
Disability supplement 11,212 1,121 11,212 1,121
Tuition and education amounts Variable Variable Variable Variable
Adoption expenses 13,247 1,325 13,247 1,325
Medical expenses Variable Variable Variable Variable
Medical expenses (other dependents) Variable Variable Variable Variable
Caregiver amount 11,212 1,121 11,212 1,121
Interest on student loans Variable Variable Variable Variable
Donations & Gifts

-first $200

– over $200

 

200

75% of income

 

20

Variable

 

200

75% of income

 

20

Variable

In general, credits are multiplied by 10% to arrive at the deduction from Alberta Tax.  In the case of donations and gifts over $200, the credit is 21%

Corporate tax measures

Corporate tax rates

No new changes are proposed to the corporate tax rates or the $500,000 small business limit.

However, Alberta recently enacted legislation to decrease its general corporate tax rate to 8% from 12% over four years beginning in 2019. As a result, Alberta’s corporate income tax rates are as follows:

Corporate Income Tax Rates

Alberta Combined Federal & Alberta
2020 2021   2020 2021
General ** 8.00% 8.00% 23.0% 23.00%
Small business* 2% 2% 11% 11%

* The small business rate and general corporate rate are based on a December 31 year end on first $500,000 of active business income.

** Alberta has accelerated the tax cuts that were enacted in 2019, by reducing the province’s general corporate income tax rate from 10.00% to 8.00% effective 1 July 2020. The rate was originally scheduled to be reduced from 10.00% to 9.00% on 1 January 2021 and to 8.00% on 1 January 2022. The general corporate income tax rate was already reduced to 11.00% effective 1 July 2019 and to 10.00% effective 1 January 2020.

Contact FBC

Have questions about this or other COVID-19 programs for Canadian businesses? Unlimited consultation related to tax matters is a key benefit of FBC Membership. We’re offering a free consult where we get to know your business and determine next steps on saving you time and money. Book your appointment online.

You can also visit our COVID-19 Resource Centre for the latest information on Canadian small business grants and other resources that will support you and your business throughout this crisis.